AMD Q4 Results In-Line, But Outlook Is Murky

Advanced Micro Devices, Inc. (NYSE:AMD) reported $1.16 billion revenue and a net loss of $473 million or $0.63 per share for the fourth quarter of 2012. The company’s revenue was in-line with expectations of Wall Street analysts. The stock price of the company surged by 10 percent to $2.69 per share at the time of this writing.

Analysts from Morgan Stanley (NYSE:MS) commented that the 4Q financial result of Advanced Micro Devices is okay, along with its GM stabilization of ~39% and reinstatement of guidance, which would probably provide some relief to investors. However, they think its path towards profitability is uncertain.

According to analysts, in the core CPU business Advanced Micro Devices, Inc. (NYSE:AMD) remained challenged by increased competition within PC market, which is already weak.

In a research note, the analysts wrote, “A return to profitability in AMD’s core PC business looks highly uncertain, and execution risk remains high given depressed spending levels. Video game console opportunities can drive EPS above break-even levels by 4Q13, but [the] stock’s value will continue to be driven by its challenged core PC biz.”

The analysts lowered their EPS estimates for Advanced Micro Devices, Inc. (NYSE:AMD) for 1Q to $0.11 from $0.17 and for 2013 to $0.19 from $0.30. According to them, “We model slightly sub-seasonal growth in 1H13 (from flattish previously as the inventory headwind did not reverse) and embedded growing to >20% by 4Q13 to drive a return to (small) profits.”

On the other hand, analysts at Credit Suisse Group AG (NYSE:CS) Equity Research believe AMD is in a very difficult position as the company tries to resize its business to reflect market share realities, while stepping up investment/innovation in new growth segments. They believed “customers will be less likely to afford AMD goodwill as an attempt to keep INTC honest as the market transitions from x86 to x86/ARM compute environment.”

Credit Suisse Group AG (NYSE:CS) analysts maintained their neutral rating and price target of $2.50 for the shares of Advanced Micro Devices, Inc. (NYSE:AMD). They adjusted their 2013 revenue estimate for the company to $4.38 billion from $4.67 billion, but raised their EPS estimate to $0.40 from $0.68, due to the pull-forward of GF related charges to C4Q12 and higher GM.